It's not the first time people have wondered if Buffett is off his game. Criticism of Buffett reached its peak during the 1990s tech bubble because he refused to invest in dot-com businesses he didn't understand. Berkshire's Class A stock sunk to roughly $56,000 a share.
When the tech bubble burst, many of those businesses failed while Berkshire continued to prosper through acquisitions and investments. These days, Berkshire's A stock trades at more than $193,000 a share.
Author and investor Jeff Matthews, who wrote "Warren Buffett's Successor: Who It Is and Why It Matters," says criticism of Buffett is a byproduct of where the overall market is because Berkshire tends to trail a surging stock market. The Standard & Poor's 500 index soared 30 percent in 2013 and has nudged up another 2 percent this year.
"Buffett always looks less exciting when everyone else does great," Matthews says.
Many investors focus too much on recent history. Critics point out that Berkshire lagged the market in four of the past five years, based on Buffett's own yardstick. That measurement, Berkshire's book value, gained 18.2 percent in 2013, lagging S&P 500's rise of 32.4 percent, including dividends.
But that short-term view obscures the fact that Berkshire Hathaway has only trailed the S&P 500 10 times since Buffett took over in 1965. And cumulatively, Berkshire has delivered compounded annual gains of 19.7 percent to the S&P 500's 9.8 percent. Berkshire is also sitting on at least $48 billion in cash.
Buffett has told investors for several years that the massive size of Berkshire makes it impossible for him to match the investment gains he delivered decades ago, but he still believes Berkshire will beat the overall market.
Bill Smead, founder of Smead Capital Management, says most people have a hard time relating to someone who thinks in terms of decades, and in his last shareholder letter, Buffett emphasized he thinks Berkshire subsidiaries like BNSF railroad and MidAmerican Energy will be thriving a century from now.
"He is the ultimate long-duration thinker," says Smead, who recently increased his firm's Berkshire investment.
Smead says he expects Berkshire will trounce the S&P 500 over the next five to ten years because so many of its subsidiaries thrive when the economy is growing.
"I don't think people realize what a machine he has created to milk the U.S. economy," Smead says.
Last year, Berkshire's profit grew more than 31 percent to $19.48 billion on revenue of $182.15 billion.
Those figures include $4.3 billion in paper gains on investments and derivative contracts Berkshire holds, up from $2.2 billion the previous year.
Even without those mostly unrealized gains, most of Berkshire's roughly 80 subsidiaries are performing well.
Berkshire subsidiaries include BNSF railroad, Acme Brick, Shaw Carpet and Home Services of America. Berkshire also holds major investments in American Express, Coca-Cola, and IBM. Its first-quarter results will be released Friday.
Andy Kilpatrick, author of "Of Permanent Value: The Story of Warren Buffett," says he thinks Berkshire is set up to consistently beat the S&P 500 by a narrow margin.
"The whole thing is up and running better than it ever has been," Kilpatrick says.
Besides routine items, Berkshire investors will vote on a shareholder proposal that would encourage the company to pay a dividend. Berkshire's board opposes the proposal.
Buffett has said he believes that reinvesting Berkshire's cash is worth more for shareholders than they would receive in a dividend. Since Buffett controls 34 percent of the voting power, it's difficult for proposals to pass without his support.
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